FTC Reaches $5.4 Million Settlement with Student Debt Relief Scammers
By Lindsay Frankel
Almost 40,000 borrowers were defrauded by the companies, which misrepresented their affiliation with loan servicers or the U.S. Department of Education, according to the complaint. The companies promoted their services on social media platforms such as Facebook to find desperate borrowers.
The scam artists persuaded borrowers to pay up to $1,000 upfront in exchange for loan forgiveness or a permanent monthly payment reduction. In reality, the FTC alleged that the companies were not affiliated with the U.S. Department of Education and did not provide any relief to former students.
The FTC will send 39,734 checks to victims of the scam, averaging $136.48. Since the checks expire after 60 days, the FTC encourages recipients to cash them right away.
In addition to the monetary restitution the FTC announced last year, the 2018 settlement calls for the companies to permanently cease all fraudulent debt relief activities and to refrain from making misleading claims about any service or product.
The FTC urges consumers to protect themselves from student loan debt relief scams, which means never paying a fee prior to forgiveness or sharing FSA login information with a third party. Consumers should beware of any company claiming to quickly forgive student loan debt, since only scammers make these kinds of promises. Real programs offering relief necessitate a long process; public service student loan forgiveness requires 10 years of on-time payments.
The FTC also reminds borrowers that there are no-cost programs for deferment, repayment, forbearance, and forgiveness available directly through the U.S. Department of Education, which don’t require the help of a student loan debt relief company. Most private loan servicers offer similar programs as well.
With 45 million borrowers holding a collective $1.56 trillion in student loan debt, scammers see struggling student loan borrowers as an easy target, and student loan debt relief scams are on the rise.